Question 1You are considering an additional product in an existing product line. What is the incremental cashflowof the new product given the following information:• Sales of the new product will be 198m but sales of the existing products will fall by 22m.• Expenses related to the new product will be 76m but the loss sales on existing products will causeexisting expenses to fall by 11m• Depreciation on the new equipment will be 17m• Tax rate is 21%

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EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 13P

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What is the opereting cash now for this project?
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You are analyzing a project and have developed the following estimates. The depreciation is $7,600 a year and the tax rate is 34 percent. What is the worst-case operating cash flow? Unit sales Sales price Variable cost Fixed costs TTT Base Case 3.100 $19 $12 $8.200 Lower Bound 2,500 $16 $10 $7.800 Upper Bound 3,400 $22 $14 $8.500 per unit O 1) -$1,311 O 2) -$641 3) $274 4) $1,206
What is the opereting cash now for this project? General accounting
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What is the annual operating free cash flow if operating revenues increase by $1.2 million, operating expenses (ex-depreciation) go up by $0.7 million, and depreciation goes up by $0.32 million? The tax rate is 31%. Express in $ million, to the nearest $0.001 mil. Drop the $ sign. E.g., if your answer is $506,500, record it as 0.507.
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Consider an uneven cash flow stream: Year Cash Flow 0 $2,000 1 $2,000 2 $0 3 $1,500 4 $2,500 5 $4,000 What is the present (Year 0) value of the cash flow stream if the opportunity cost rate is 10 percent? What is the value of the cash flow stream at the end of Year 5 if the cash flows are invested in an account that pays 10 percent annually? What cash flow today (Year 0), in lieu of the $2,000 cash flow, would be needed to accumulate $20,000 at the end of Year 5? (Assume that the cash flows for Years 1 through 5 remain the same.)
Estimating Incremental Cash flow After- Tax 1. Galaxy Fans is considering a proposal to buy a new fixing machine. The price of the machine is $108,000, and shipping and installation costs would add another $12,500. The machine falls into the MACRS 3-year class, and it would be sold after 4 years for $65,000. The applicable depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%. There would be no effect on revenues, but pretax labor costs would decline by $44,000 per year hence it is net saving by the new machine. The firm falls in 40% tax bracket. Required: Calculate the initial cash out flow at Year 0 What are the project’s annual net incremental cash flows during Years 1, 2, and 3? Find out the terminal cash flow of the new machine at year four.
You are analyzing a project and have developed the following estimates. The depreciation is $47,900 a year and the tax rate is 21 percent. What is the worst-case operating cash flow? Unit sales Sales price per unit Variable cost per unit Fixed costs -$2,545 $11,145 $88,855 $27,556 O $63,937 Base-Case Lower Bound Upper Bound 9,800 12,800 $34 $24 $ 9,200 11,300 $ 39 $25 $ 9,700 $44 $26 $ 10,200
Consider the following project: Net cash flow 0 -215 1 Change in value (economic depreciation) Expected economic income 0 Period 2 90.55 3 246.40 The internal rate of return is 18%. The NPV, assuming a 18% opportunity cost of capital, is exactly zero. Calculate the expected economic income and economic depreciation in each year. (Negative answers should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.) Period 2 3

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